Annual inflation in the Organization for Economic Co-operation and Development (OECD) stood at 1.95 percent in July 2013. This was the fourth consecutive increase on a monthly basis. The consumer prices in OECD area increased 1.82 percent in June 2013 and 1.90 percent in July last year. The growth in inflation rates is some indication of a recovering global economy but examination into the components of these consumer prices indicates otherwise.
Figure 1: Year on year percentage change of OECD total consumer prices
Rise of energy prices in OECD
The increase in prices was driven mainly by the increase in energy prices during the month. Energy prices in the OECD increased 4.5 percent during the month of July. Food inflation was another factor pulling the total inflation upwards as the increase in food item prices was 2.2 percent in July. As a result, non-food, non-energy inflation remained stable at 1.5 percent during July 2013.
Figure 2: Consumer prices in selected areas, July 2013
Inflation levels of OECD nations
The United States also had a greater share in pulling up the overall OECD inflation levels. Consumer price inflation in the U.S. was recorded at 2.0 percent while that for the Euro area stood at 1.6 percent. While the Euro area continued to deflate the overall measure of OECD prices, the U.S. played its role in pulling this number upwards.
Annual inflation increased in Japan to 0.7 percent in July, up from 0.2 percent in June, the highest rate since November 2008. Hence positive results of Japan’s Abenomics were observed during this period.
Inflation also picked up slightly in France to 1.1 percent from 0.9 percent, Canada to 1.3 percent from 1.2 percent and Germany to 1.9 percent from 1.8 percent in July 2013. However, annual inflation slowed down in Italy to 1.1 percent down from 1.2 percent and the United Kingdom to 2.8 percent down from 2.9 percent during the same period. Despite the decrease in inflation in the United Kingdom, the country still had the highest level of Consumer Price Index (CPI) which was recorded at 117.79 for the month of July 2013.
Figure 3: Consumer Price Indices across OECD countries in July 2013
Inflation in Asian market
Inflation may have increased in the developed countries and may be picking up pace but still remains far behind other major economies which are growing so much faster than OECD nations. Inflation in China was recorded at 2.7 percent during July, despite talks of a slowing industrial economy.
Inflation in Brazil, India, Indonesia, Russia and South Africa remained above 6 percent, a level that the OECD nations have not been able to achieve in decades. However, the political and economic risks in these economies is also higher and their growth is unstable and unpredictable at times.